You have two kids, one on the way, and a three-bedroom home. You thought it would be fine but there is no room for the visiting grandparents. You need a bigger house! The challenge is you need to borrow money to renovate or buy a bigger home and you are down to one and a half incomes for the next 6 months.
What can you do?
Firstly, if you find yourself in this position, do not despair. There are solutions to this problem and it will most likely be lurking in the detail of a bank’s lending policy. It just might be that it is not in your current bank’s lending policy.
We had a client who was in this exact situation. They were looking to borrow additional funds to complete a renovation while in this Maternity/Paternity income pattern. Their current bank had a restrictive “returning to work” income policy. The policy excluded people from borrowing unless they were returning to work within 60 days. These people were not. Their bank would not allow them to live more comfortably by enabling them to renovate. Fortunately, they gave us a call and asked if we could could help them.
Our first step was to review the Maternity/Paternity lending policy of all the lenders we use. After some serious digging we found a lender (surprisingly, one of the big 4) with a lending policy that would accept the full time income of the reduced income borrower for a much longer time-frame. The borrower on leave just needed to meet the following criteria:
- They have been working for more than 12 months with the same employer;
- They are looking solely after the children while on leave;
- They will be returning to work in a full-time capacity post leave;
- They could cover the additional repayment by other means, not just by income.
The first three conditions were easily met. The fourth one we had to substantiate in detail. Fortunately, our new clients had some savings and were in advance on their current loan which they could drawback on. We showed that they could use these funds to top-up their new repayment until they were back into full-time work again. We showed that they could do this without experiencing any financial hardship.
We refinanced our client’s loan with the new lender so that our clients could undertake the renovations now. They did not have to wait the six months and the grandparents, well they could stay in that new back room where (apparently) they belonged.
So, what is the one big tip?
Go to an expert.
Engage a professional Mortgage Broker who has a whole suite of lenders to use; a Broker who knows what to look for and where to look for it when it comes to the various lending policies out there.
If you don’t, you could be living in that cramped uncomfortable position with three screaming kids wishing you were back at work!